Measuring Corporate Default Risk (Clarendon Lectures In Finance)

This book, based on the author's Clarendon Lectures in Finance, examines the empirical behaviour of corporate default risk. A new and unified statistical methodology for default prediction, based on stochastic intensity modeling, is explained and implemented with data on U.S. publiccorporations since 1980. Special attention is given to the measurement of correlation of default risk across firms. The underlying work was developed in a series of collaborations over roughly the past decade with Sanjiv Das, Andreas Eckner, Guillaume Horel, Nikunj Kapadia, Leandro Saita, and KeWang. Where possible, the content based on methodology has been separated from the substantive empirical findings, in order to provide access to the latter for those less focused on the mathematical foundations.A key finding is that corporate defaults are more clustered in time than would be suggested by their exposure to observable common or correlated risk factors. The methodology allows for hidden sources of default correlation, which are particularly important to include when estimating the likelihoodthat a portfolio of corporate loans will suffer large default losses. The data also reveal that a substantial amount of power for predicting the default of a corporation can be obtained from the firm's "distance to default," a volatility-adjusted measure of leverage that is the basis of thetheoretical models of corporate debt pricing of Black, Scholes, and Merton. The findings are particularly relevant in the aftermath of the financial crisis, which revealed a lack of attention to the proper modelling of correlation of default risk across firms. 9780199279241 0199279241 0 BOOK Business & Economics NOT_MATURE http://books.google.com/books/content?id=uTs4zwEACAAJ&printsec=frontcover&img=1&zoom=5&source=gbs_api en

• | Author: Darrell Duffie
• | Publisher: Oxford University Press
• | Publication Date: Dec 22, 2022
• | Number of Pages: 128 pages
• | Language: English
• | Binding: Paperback
• | ISBN-10: 0199279241
• | ISBN-13: 9780199279241